A stronger Canadian Dollar features in Crédit Agricole’s forecasts, with USD/CAD falling to 1.34 by June 2027 and 1.32 that December.
Crédit Agricole forecasts a sustained Canadian Dollar recovery through 2027, even as its broader outlook allows for US borrowing costs to rise further first.
The bank puts USD/CAD at 1.38 in December 2026, 1.34 in June 2027 and 1.32 in December 2027.
A falling rate means a stronger Canadian Dollar, with fewer Canadian Dollars required to buy one US Dollar.
US yields remain an obstacle before 2027 relief
Crédit Agricole’s wider US outlook cautions against assuming an immediate collapse in Dollar support:
“We expect Treasury yields to continue rising into early 2027. The rates market has priced in a more restrictive policy path, reflecting persistent inflation pressures and growing expectations that policymakers may need to tighten in the months ahead. Inflation has proven more resilient than expected, while recent increases in energy prices risk creating additional upside pressure on headline inflation in the coming months.”
The bank also warns:
“Front-end yields are likely to remain particularly sensitive to incoming inflation data and Fed communication over the coming quarters.”
Crédit Agricole’s currency path therefore allows for Canadian Dollar gains even while US yields remain a headwind.
Later in 2027, its broader currency analysis identifies a potential change:
“The US fiscal outlook could worsen further, and servicing US debt could start dominating the fiscal (and monetary) policies once US inflation subsides in 2027. We expect the Fed to cut rates in Q427, in a blow to the USD rate appeal.”
At the time of writing, USD/CAD traded near 1.4249, down 0.11% on Tuesday after rising 2.77% in September.
Reaching 1.32 would require the pair to fall approximately 7.4% from that level, making this a substantial recovery forecast.
Canadian growth and employment face an early test
Crédit Agricole expects Canadian economic growth to strengthen from 1.5% in 2026 to 1.8% in 2027, with annual inflation averaging 2.1% and 2.0%, respectively.
Tuesday’s trade figures provided some encouragement: Canada’s merchandise surplus widened to C$4.2 billion in August from a revised C$787 million in July.
Statistics Canada noted that tariff announcements can prompt importers to bring shipments forward before the duties take effect.
The next major domestic test is the September employment report on 9 October, following a setback in hiring.
Statistics Canada described August’s weakness plainly:
“Employment declined by 42,000 (-0.2%) in August and the employment rate fell 0.1 percentage points to 60.8%. The unemployment rate was unchanged at 6.4%.”
The labour-market risk also features in our Pound-to-Canadian Dollar outlook.
Another employment decline would make the recovery harder to establish, particularly if it weakened expectations for Canadian interest rates relative to US rates.
Friday’s jobs figures will test whether Canada’s economy can begin supplying its own support before that forecast reduction in US rates arrives.
Our currency coverage draws on live market data, official economic releases and published bank research.
